The Brexit Effect -What’s next for Markets

Britain’s Vote – European Union Likely to Disturb British/European Economies

Mentioning that Brexit vote on June 23 which had taken the financial market unaware could be an understatement and the pound, British stocks as well as the Gilt yields had mounted sharply in the week which lead up to the vote but crashed once the results began coming in.

Generally speaking, strategists on Credit Suisse’s Global Markets and Investment Solutions and Products (IS&P) teams anticipate markets to stay volatile in the forthcoming days and for the investors to favour safe assets to the uncertain ones.

 Some of the views have been highlighted from across the bank on how Britain’s referendum vote leaving the European Union is likely to disturb the British as well as the European economies and a broad range of financial resources.

The Economic Impact

The Credit Suisse’s Global Markets and IS&P team are of the belief that the Brexit vote would be creating a considerable amount of uncertainty for British businesses which would eventually lead to a weakening in GDP. Both the teams also tend to believe that the Bank of England would step in with cuts in rate.

Moreover, the Global Markets team believes that the Bank of England to cut rates from 0.5% to 0.05% and had another round of measurable easing to the tune of £ 75 billion which would not be later than August 2016.

Credit Suisse’s Chief Investment Officer for International Wealth Management, Michael O’Sullivan, pointed out that the central banks all over the work seems to be on alert to step in, ensuring that their own banking systems tend to have sufficient liquidity. Besides weak corporate spending, Global Markets economists anticipate growing inflation as well as the decline of the British pound to squeeze household expenditure.

Accordingly, they predicted that GDP would fall 1% between the third quarter of 2016 and the first quarter of 2016 which would have lessened their growth predictions for 2016 from 1.8% to 1% and the 2017 growth predictions from 2.3% to 1%.

Significant Slowdown in Growth

The analysts of Credit Suisse’ IS&P also expect a significant slowdown in growth and the teams contemplate it possible that the deteriorating value of the pound would be causing a front-page inflation to spike. The Global Markets team also seem to anticipate an impediment to the recent pickup in corporate spending especially in Europe together with the tightening of financial conditions.

The economists of the team had dropped their European GDP growth expectations from 1.7% to 1.5% in 2016 and from 2% to 1% in 2017. Credit Suisse’s IS&P team are of the belief that the Eurozone would not be following the U.K. into depression unless the Brexit vote ends in severe financial infection to peripheral economies like Italy. However, the analysts on the team envisage this as a tail risk. The IS&P team are of the belief that the European

Central Bank would lengthen its quantitative easing program whereas the Global Markets team consider that there is a possibility with added easing through the prevailing TLTRO program offering low-interest funding to commercial banks.Credit Suisse’s Investment Committee has downgraded European stocks to neutral as well as British stocks to drift whereas the U.S. stocks to neutral. Moreover strategists of Credit Suisse’s Global Markets had shifted their year-end goals from 6,600 to 6,200 on the FTSE 100, 2,150 to 2,000 on the S&P 500 and on the Eurostoxx 50, from 3,350 to 2,950.

Bank of England Warns Property is a Key Risk to Economy

Bank of England Cautions – Commercial Property Main Key to Economy

The Bank of England has cautioned that commercial property would be the main key to the economy after the Brexit vote. The main concern is that the market from warehouses to office space to retail parks with regards to commercial property is deep distress. Foreign investors, who have purchased commercial property, have made around 45% of all commercial property bought and sold since 2009. The inflow of money to UK seemed to slow down, even before the Brexit vote and dropped by 50% during the first quarter of 2016.

A warning had been given by The Financial Policy Committee that `valuations in some sections of the market, particularly the prime London market had become stretched’. The Financial Stability Report of the Bank points that the real estate investment trust share prices had dropped severely and cautioned about the risk of `future marked adjustment in commercial real estate prices’. According to the translation from Bank of England, there is a risk that commercial property prices may crash.

Considerable amount of most of the valuable prime London commercial property is said to be in the City where some of the foreign investors like banks and investment manager have a

ssisted in financing a powerful and constant session of construction, which have been symbolised by iconic buildings with nicknames like the Gherkin, the Cheese-grater or the Walkie Talkie

Inflows of Foreign Investment in British Companies – Slowed Down

Since 1980, the UK had earned abroad, extremely less selling goods and services than it had spent on imports thus developing a current account deficit. Roughly there was more money going out than coming in. For years it was compensated by attracting money to the UK in two ways.

The first way was that foreign investors had been willing to buy shares in UK companies and lending money to their government. The second was, the foreign companies had been ready in investing directly for instance, constructing new buildings in the City of London or in investing in business such as Jaguar Land Rover in order to turn it into success.

The report of the FPC had stated that all inflows of foreign investment in British companies had slowed down in the approach to the referendum.

Investors’ Belief – Risk in Investing in UK Companies

Investors are now of the belief that they will be taking a risk in investing in UK companies, that are reproduced in share prices, the biggest two-day slip in the value of sterling in more than forty years.There have been some reassuring words in the report. The banks for instance have been stress examined against scenario where the commercial property drops by 30% and residential by 35% with severe recession.Banks tend to have high quality liquid assets of £600bn like shares in top companies, government cash and bonds.

They could endure losses which were double as those undergone in the 2008 crisis without falling short of money. With that security, the Bank of England ruled on that the banks did not need to build up £150bn as a `counter-cyclical capital buffer’. The counter-cyclical buffer is just cash that is kept aside in good times so that it can be made available when the down-swing occurs

Markets Struggle with Brexit Hangover, Pound Sinks

Asian Stocks Dropped/British Pound Plunged – Brexit

Asian stocks dropped and British pound plunged over 2% on Monday while markets wriggled to shake off the uncertainty which had ignited due to Britain’s choice of leaving the European Union. Emotion seemed weak even though the most horrible of the uproar envisaged on Friday when the global stock markets had suffered one of their largest declines in almost five years, had improved. Senior foreign bond strategist at Mizuho Securities, Hiroko Iwaki, had stated that “things are so uncertain that investors still do not have a clear idea how much risk assets they need to sell. But it is safe to assume investors are not yet done with all the selling they need to do. I would not be surprised to see another 10% fall in share prices”. From the several questions regarding the British exit, or Brexit, which have generated are `just how much UK and European economies will slow, how they would negotiate their new relationship and how European leaders would try to improve the collapsing EU’. The world’s most traded stock futures; US S& P dropped 0.4% to 2,011.50, soaring close to the three and a half month low of 1,999 of Friday.

Brexit – First Surprise in Re-Calibration

The widest index of Asia Pacific shares MSCI, beyond Japan, shrank losses to 0.6% since the companies especially with UK exposure were under pressure.Equity strategist at Bank of America Merrill Lynch in Hong Kong, Ajay Singh Kapur had written in a note that they think Brexit could be the first surprise in a re-calibration of the world away from globalisation towards more inward-looking policy making’.He further added that `Brexit has now possibly opened up more uncertainty about the European Union project and that the already crashed down Asian and emerging equity market could receive asset allocation flows from Europe. Nikkei of Japan extended gains to 1.9% which was a fractional rebound after the hefty 7.9% of Friday’s fall. Stocks of Japan had been supported by stronger warnings from the officials of Japan that they would interfere in currency markets in stabilising the yen. However, the dollar still fell 0.3% against the secured yen, trading around 101.81 yen.

Sell-Off in Euro – Exit Referenda Builds

Shares of China also increased with the CSI 300 index as well as the Shanghai Composite both increased around 0.8%. British pound dropped 2% to $1.34, yet some distance from the 31 year low of $1.3228moved during wild trade of Friday. Moreover, euro had also come under additional pressure, falling against the dollar by 0.8% as the investors fret that Brexit would strengthen the anti-establishment mood in Europe and also communicated about breakdown of the union. The chairman of New Sparta Asset Management in London, Jerome Booth, had commented that “there will be sell-off in the euro as talk of other exit referenda builds. This sell-off will be more profound and long lasting and will be not just against the dollar and yen but also against the pound. It would also raise fears of significant loss of values for holders of Eurozone government bonds”. Since December 2010 on Monday, Euro’s weakness aided in pushing the Chinese Yuan to its weakest level against the dollar and dropped to 6.6396 per dollar on opening at 6.6360 a dollar, in comparison with the five and a half year low midpoint level of 6.6375 agreed by the central bank, reaching an intraday low of 6.6469.

Yen soars and Nikkei tumbles as Bank of Japan rejects further stimulus

Yen Scaled High – Nikkei 224 Fell

The stockindex of Tokyo had plunged over 3% on Thursday as mounting yen beat exporters after the Bank of Japan decided against increasing its incentive. Nikkei 225 fell 3.05% to 15,434.14 in trading, late afternoon. The yen had earlier rushed to a 21-monthhigh against dollar in the wake of the BoJ’s intention of leaving its enormous 80 trillion yen asset-buying plan unaffected, since fears on the future of Britain in the EU pound financial markets. Investors incline to buy yen as a means of safe asses in case of turmoil, though the stronger currency seems to be bad for Japanese stocks since it tends to threaten the productivity of the exporting giants of the country.

The yen scaled high as 104.11 against the dollar, in afternoon deal, its strongest level since September 2014. The decision of Bank of Japan had come up on Wednesday, after the Federal Reserve had decided against increasing interest rates and Janet Yellen; its boss had announced a warning on the possible Brexit from the US. Markets in the world have been left in chaos over the past week tension regarding the global economic outlook and in recent days, a rising sense that the referendum of June 23 would be seeing Britons vote breaking away from the European Union.

Weaker Hiring/Uncertainty – Referendum of the EU

Senior economist at Mizuho Securities, Norio Miyagawa stated that `there is nothing in recent economic indicators which would now lead the BoJ to change its economic outlook. But the rising yen would place more downward pressure on consumer prices and so expects the BoJ to ease in July’.

The US Federal Reserve that had been cautiously considering to raise interest rates or not, had held back at its own meeting on Wednesday and had instead downgraded its economic predictions, quoting weaker hiring as well as uncertainty regarding the referendum of the EU. This week’ polls suggested a tight contest in the vote of next week, being a main factor regarding the rush for safe havens inclusive of the yen. FTSE 100 had opened at 0.7% lower on Thursday, a presentation which quickly removed the uneasy gains of Wednesday after four previous days of heavy fall which saw the index fall less than 6000 barrier.

Energy Stocks/Miners Safe from Latest Beating 

The energy stocks and miners only were safe from the latest beating on values. There were comparable falls in France as well as Germany. Moreover the pound was also under pressure against the dollar down 0.4% at 1.41.4 which is an 11% down a year ago. Head of trading at ETX Capital, Joe Rundle had mentioned that the `markets were on the defensive again as traders foreseen the risks of Britain leaving the EU. Since polls indicate more support for Vote leave, City watchers had begun to take the threat rather seriously and began to price in the option of a Brexit.

For the City, it could be big; most of the banks and airlines would have to consider seriously moving outside the UK if a Brexit tends to occur. He further added that a slump in sterling could be a massive boon for some FTSE 100 firms. Miners would be seeing development in their sterling-denominated balance sheet when they sell in dollars and retailers would also probably prefer to stay on in UK though they would want to spin off their European arms’.

US dollar wallows near 4-week lows as Janet Yellen sounds cautious note

Dollar Flanked, Close to Four-Weeks Lows

After the remark of Federal Reserve Chair Janet Yellen failed to toss a lifebuoy to the recently plunging greenback, the dollar flanked up though still reeled close to four weeks lows against a basket of currencies on Tuesday. The index of the dollar that tracks U.S. currency against a basket of six main rivals pushed up 0.1% to 94.017, though it stayed within sight of its overnight low of 93.745, the weakest level since May 11.

However Yellen had remained comparatively enthusiastic regarding the overall U.S. economic outlook, stating that the Fed would hike the interest rate, she provided no fresh clues about timing, calling the last month’s U.S. jobs data as `disappointing’. Sue Trinh, senior currency strategist at RBC Capital Markets in Hong Kong, had commented that `she was positive though compared to her speech of May 27, when she had said a move would have been suitable `in the coming months’, she had not been specific regarding the timing’. The dollar seemed to be under pressure since the Friday reports of the U.S. nonfarm payrolls had indicated the slowest job growth in more than five years in May, suppressing prospects for a near-term U.S. interest rate rise.

Recent Currency Market `Orderly’

The U.S. interest rate futures implicated traders had all but priced out any chance the Fed would raise rates at its policy meeting next week, even before Yellen had spoken. The dollar had upturned its previous losses against the yen and rose 0.2% to 107.81 yen pulling away from the previous session’s low of 106.35, its weakest in a month.

It stayed wary of levels above 109 yen, where it remained as recently on Friday. The Japanese Finance Minister, Taro Aso, earlier on Tuesday informed reporters that he would desist from commenting on the possible response of Japan on the currency market if the yen was to rise further. He also declined to comment on the remarks of U.S. Treasury Secretary Jack Lew over the weekend which described the recent currency market movement as `orderly’ as an indication of caution towards the currency intervention.

Recent Unstable Sterling Marked Hard Rebound

The euro had pushed up 0.1% to $1.1360, reversing toward the earlier sessions’ almost one-month high of $1.1393. The recent unstable sterling marked a hard rebound after dipping more than 1% to three week lows in the earlier session, resulting in several polls ahead of the June 23 poll preferred the chance of British voters choosing to leave the European Union.

However the two polls in Tuesday’s newspaper portrayed Britons narrowly preferred staying the EU, when compared to the surveys released earlier. The pound had added 0.7% to $1.4524 after moving a one-week high of $1.4664 and on Monday had followed a low of $1.4352, its deepest all-time low since May 16. The Australian dollar had risen 0.6% to $0.7413 to one-month high after Reserve Bank of Australia had held policy stable as anticipated. It stated that its decision had been steady with maintainable growth. According to a Reuter’s poll, the central bank is broadly likely to hold rates at record low of 1.75% after its cut in May, with 49 of 52 economist’s surveyed sightingthe RBA standing pat.

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Stronger Yen Weighs on Nikkei

Shares Hit by Yen Strengthening Against Dollar

Winning streak of five meetings for Japan’s Nikkei ended as shares were hit by the yen strengthening against the dollar. Benchmark of Japan, Nikkei 225 index dropped down to 279.25 (1.6% at 16,955.73). Dollar slipped below 110 yen. For Japanese exporters, stronger yen is usually seen as negative.

This resulted due to the Japanese Prime Minister; ShinzoAbe’s announcement, to a delay of a planned rise in sales tax. The rise in sales tax rate to 10% from 8%, planned for the year 2017, has now been pushed back to 2019.In individual stocks, Softbank had increased by 0.4% after the Japanese technology firm had stated that it would be offloading $7.9bn worth of shares in e-commerce giant of China - Alibaba.

 The transaction is said to reduce the stake of Softbank in Alibaba from 32.2% to 28%. The Shanghai Composite, in China, had edged down from 0.1% to 2,913.51 while the benchmark Hang Seng index in Hong Kong ended 54.11 points less at 20,760.98. The S&P ASX/200 index in Australia had closed down 55.39 points (1% at 5,323.17). Kospi index of South Korea was even for most of the session, closing at 1,982.72.

Strength of Yen – Decline of Exporters

Asian stock markets were generally higher on Tuesday tracking gains in U.S. stocks but Nikkei was assessed by the recent strength of yen and weak earnings results. The S&P 500 on Monday which had settled at a record high of 1593.61, lifted by a rally in the technology segment and the earnings sustained to be the main focus in the region. Japan’s Nikkei Stock Average dropped 0.2% to 13.860.86amidst the recent weakness of the dollar as well as the key ¥100 level continued to be elusive.

The dollar-yen pair had been at ¥97.70 from ¥97.77 in New York, late Monday. Nikkei had jumped to 11.9% till April and continues on course for its largest monthly increase since December 2009 irrespective of Tuesday’s drop. The strength of yen together with the disappointing results had led to the decline of exporters. A heavily weighted component, Fanuc, on the Nikkei had dropped to 5.6% after the company had informed that its operating profits slipped by 17% on-year to ¥184.8 billion for the fiscal year ended March 31.

Abenomic Effect on Consumer Confidence 

Ricoh had dropped to 8.4% after its fourth-quarter operating profit had come in at ¥23.0 billion considerably losing guidance and consensus forecasts, apparently owing to a fall in sales of the domestic office equipment as well as larger-than-expected rise in costs. CLSA equity strategist Nicholas Smith, noticing the data for March indicating an increase in household spending and a fall in the jobless rate commented that `regardless of stock price weakness, the signs for Japans’ economy are positive. Some of the data can be attributed to the `Abenomics’ effect on consumer confidence’.

 Household spending had increased to 5.2% in March signifying consumers are showing more inclination to spend whereas unemployment had dropped to 4.1% of the labour force in March from 4.3% in February, which decline to its lowest since November 2008. Industrial production in March had increase by 0.2% on-month for the fourth straight month. Investors would be paying consideration to separate strategy meetings by the European Central Bank and the U.S, Federal Reserve for indications, later in the week.

Hard times on Wall Street as pay cuts, layoffs loom

Wall Street Pay – Trending Low

Latest report from compensation consultant Johnson Associates indicates that Wall Street pay tends to be trending lower this year as frail first quarter earnings, strong business environment and regulatory restraints will cause in slashes in almost all the trade’s lines of business. Managing director of Johnson Associates, Alan Johnson stated that this is the first time since the financial crisis that they have seen everyone trend down. The report is established on the results from the first three months of the year and hence the viewpoint could alter, according to Johnson.

But he did note that is a psychological change amidst the clients of his firm.Financial companies believe that the environment could be harder ahead; marked by more opposition, low interest rates for extended and extra regulation. Johnson has stated that there seems to be a lengthy list of things and that their clients have put them together saying that it is just going to become harder. According to report, in the financial industry, incentive pay will drop between 5% and 20% this year and the exemption to it will be in retail as well as commercial banking where the pay would be flat to around 5%.

Year Ahead Fair Amount of More Job Cuts

Johnson had mentioned that this area moves more with the cost of living and that the sector has been performing well. On the other hand, pay in investment bank would weaken between 10% and 20% though compensation in sales and trading is said to drop 5% to 20%, as per report and it is not only investment bankers perceived in taking a pay cut, since hedge fund compensation is projected to decline by 5 – 15%.

The pay for asset managers is seen off at 5% to 10% owing to weak inflows together with lower to flat appreciation in assets under the category of management. Together with pay being cut, payrolls would also be trimmed according to Johnson. He further added that it is quieter than in the past, though it seems to occur as one speaks. This year and ahead there will be a fair amount of more job cuts.

Global Mergers/Acquisitions – Volume Plunge 20%

Most of the financial companies are persistently reducing head count in places inclusive of London and New York since the cities tend to be too expensive, deciding to cut on jobs or move the workers to lower-cost centres. According to financial services data firm Dealogic, global investment banking businesses seemed to suffer the slowest first quarter since 2009.

The almost$750 billion in global mergers as well as acquisitions signified a volume plunge of 20% year over year, as per Dealogic report recently. The analysts stated that banking revenue was affected by a combination of slow start to the years’ M&A, weak high-yield debt issuance together with lingering weakness in the trading operations of banks. Making matter worse was the trading desk revenue which had been shrinking at several top banks.

Morgan Stanley had revealed plans of reducing head count in its fixed income, currency as well as commodities trading operation as a measure of a broader plan of streamlining operations and generating savings. But the stock of the bank had recovered from early February lows, and the shares are yet down by about 20% on the year. No comments have been provided by representatives of Morgan Stanley.

Should We be worried about our Pensions

Pension Scheme – Attention on Health of Final Salary Pension

The efforts of BHS together with its pension scheme have drawn attention on the health of final salary pensions. Over the years, 20,462 members of BHS staff right from shop workers to executives have paid into the BHS final salary pension scheme and now will receive less during retirement than they had expected. The scheme which is said to be like a black hole or deficit of £571m is presently in the hands of the Pension Protection Fund – PPF, which is a lifeboat organisation that tends to step in when companies seem to be ruined.

The BHS scheme is considered to be only one of thousands of final salary pension schemes linked to companies all over UK, schemes that guarantee to pay retirement income depending on certain percentage of the ultimate salary each year for the rest of your life. Latest figure of the PPF portrays that UK final salary pension schemes tend to have a collective deficit of £302bn and there are 4,891 schemes in deficit when compared with 1,054 in excess. It is a bit doubtful that some may be struggling. Joe Dabrowski from the Pensions and Lifetime Savings Association – PLSA which is the trade body for pension schemes has stated that schemes are facing challenging times.

Calum Cooper of pension consultancy Hymans Robertson portrays a bleak picture. He states that there are between 600 and 1,000 final salary pension schemes at risk of not being capable of paying the pension of their members at the time of their retirement and this is a very substantial number which puts over a million pensions as well as the jobs at risk.

Experts agree that there seems to be two main causes of the black hole in final salary pension schemes. The first is comparatively simple; people are living for longer period which makes pensions more expensive for companies since they are paying the pensioners for a longer period. The second main issue is the uncertain economic position wherein pension schemes tend to depend on the contributions from employees being invented successfully. Long period of low interest rates together with volatile markets have made it difficult in making money from investing.

Pension Schemes Related to Performance & Strength of Parent Company

Mr Cooper states that the final salary schemes pushed in £30bn in the last year in an attempt to make up for poor returns though it has not gone more than a fraction of the way in ensuring things are evened up. Senior partner at actuarial consultants Lane, Clark and Peacock, Bob Scott informed that another problem is `over-regulation’. He stated that this added to the problems for businesses attempting to keep schemes in good health.

According to Tom McPhail, head of retirement policy at investment company Hargreaves Lansdown informs that there is a wider threat considering the design of final salary schemes. He states that were there many more schemes to get into trouble, they would seem to be very expensive to rescue.

He adds that the challenge is whether it is accepted that there will be these constant failures maybe ultimately putting the subsidy of the PPF itself under pressure. Pension schemes are related to the performance and strength of their parent company as pointed out by Mr Cooper, deficits of some schemes tend to be larger than the actual business supporting them.

Too Much Dividend can be a Turnoff, say Investors

European Companies – Highest Amount of Dividends

European companies have been paying the highest amount of their earning by way of dividends in over 40 years fuelling fear among analyst on whether such kinds of pay-outs are viable. Investors have for a long time dealt with queries of what companies need to do with the escalating cash load, to return it to shareholders or spend it on technology, research and development, top staff or bolting on new business for the future growth.

For the past five years income-hungry investors received dividends from the European firms and the pay-outs offered a solution to the combination of sluggish economic growth, aggressive central bank policy, enabling what had pushed bond yields to record lows and changing stock markets.

However, the growing cut off between earnings as well as dividends together with worries which companies would be adding debt to fund the shortfall was urging a reconsideration of this proposal. Senior research manager at S&P Global Market Intelligence Julien Jarmoszko stated that they were seeing a lot of companies trapped into their dividend policy.As per Thomson Reuters’ data, almost 60% of Europe Inc.’s earnings per share had been returned to the shareholders as dividends.

Cautionary Sign to Companies – Investors to Stop Rewarding Capital Returns

Companies’ partiality regarding dividends is in no small amount fuelled by investors encouraging companies to part with cash due to restricted opportunities for capital spending. However a shift is in progress. Last month’s Bank of America-Merrill Lynch survey of global fund managers, in one of the cautionary sign to companies that tend to borrow to fund buybacks and dividends, had suggested that investors may stop rewarding capital returns to the same degree as done earlier.

Net percentage of fund managers saying pay-out ratios to be `too high’, had been at the highest level since March 2009. Fund managers instead are progressively searching for earnings and rewarding companies which are either reinvesting back profits in order to expand their business or those which have cut pay-outs to protect their balance sheets.

Tim Crockford, lead manager of the Hermes Europe Ex-UK Equity Fund had said that they like companies which do not essentially pay too much of their cash flow out since they have good opportunities of investing in fixed capital, generating higher returns in the future through these investments.

Leaner Balance Sheets Indicates Substantial Shift

Crockford pointed out Spanish Technology Company Amadeus IT and German laboratory equipment company Sartorius as good examples. For instance, Amadeus had spent money for investment in its IT business, making the services of the firm much more appealing to customers like airlines.

In the meantime, some commodity connected firms that had cut dividends in an effort todeal with the slump in metals prices had seen their share prices gathering. Glencore that had lost more than half of its value last year before suspending dividends in September, had profited by 13% since then. BHP Billiton had gained 30% since cutting its dividend in February.

The inclination of accepting lower or no dividends in favour of leaner balance sheets indicates a substantial shift. Besides, it would also signal to European firms that attempts to spend on themselves and getting in front of a pickup in growth would be compensated while stubborn reliance on pay-outs would not.

BHS Collapse - Pension all you Need to Know

Credit: Dominic Lipinski/PA Wire

Defined Benefit – DB Scheme

Employees provided with financial security when they tend to retire seem to bea useful aim for liable company.Several of Britain’s biggest firms have set up defined benefit – DB pension schemes over the years, which tend to reward the staff based on how much they seem to earn and how long they work. There are around 12 million active members in Britain during the heyday of the DB pension in the 1960s and 70s and it was clear that companies could not afford to support so many people in this way for decades after they had finished working and the long period of strong stock markets had concealed the worst of the problem in the 1980s.

Towards 2007, there were only 2,240 open DB schemes with an addition of 6,250 still paying out though closed to new members. This relates to more than 38,000 less generous defined contribution schemes. As for companies which are left with the gold-plated pensioners, even if they tend to have adequate funds to pay them, the long-term liabilities could be bigger than the business. The RSA insurance firm is just one FTSE 100 firm where its pension fund is many times larger than its own £5bn value of the market.

Pension Fund of Company Has a Deficit of £157m

When a company tends to get ruined, the first thought should be for the workers who will not only lose their jobs but their retirement income could also be at risk. Often a trouble company tends to have pension deficit and so it is the case with BHS, a respected British retailer that has been overtaken by changes in fashion. The present workforce at BHS of about 11,000 is dwarfed by the 20,000 people qualified to claim a pension.

The scheme has resources of over £400m though its deficit between its resources and disabilities is over £200m. It is estimated that the pension fund of the company has a deficit of £157m. Though the company had been struggling financially for some time, it has gone into administration which is a process wherein a company is controlled by a licenced professional who tends to run it in a way protecting creditors as well as the company directors. Presently administrators Duff and Phelps have been running BHS as going concern and if it does not discover new owners, it could begin the process of realising its assets to cope up with its debts.

Possible Buyers Apprehensive

As of March 31, 2015, the company is said to have £435m of pension assets which indicates the scheme was less than 50% subsidized. It is assumed that Sports Direct had held talks regarding buying some of the 164 stores of BHS together with a number of other retail chains who have expressed interest in purchasing part of the company or its estate. However possible buyers are apprehensive by the £571m pension deficit of the firm.

The Pension Protection Fund which was set up in 2005 tends to use an annual levy charge to all companies with DB schemes in order to support the one whose corporate sponsor tends to fail. The PPF has 220,000 current as well as prospective pensioners on record and intends to be self-funding by 2030. Rescue of BHS’s pension is set to be among the top ten largest deals though comfortably within the financial abilities of the lifeboat.

Yellen The US is not a ‘Bubble Economy'

Yellen – Rebuffing Political Rhetoric – Bubble Ready to Burst

Janet Yellen, Federal Reserve Chair had touted recently on the strength of the United States economy, rebuffing political rhetoric recommending a bubble was ready to burst. Yellen noticing a healing labour market and a 5% headline unemployment number, had commented, `I certainly wouldn’t describe this as a bubble economy. Yellen had been on a panel with the earlier Fed Chairs Ben Bernanke, Paul Volcker and Alan Greenspan at the International House in New York and the U.S. central bank heads had discussions on the U.S. economy as well as monetary policy all over the world.

Yellen’s comment came soon after the Republican presidential contender Donald Trump’s disagreement that an economic bubble would erupt. She noted that she did not see `imbalances’ like `clearly overvalues’ asset prices. Though Volcker acknowledged that he saw some overextended pieces of the financial system he agreed stating that he does not believe that a bubble exists. Yellen adds that the global economy has been seen as a comparatively weak growth inspite of the positive signs in the U.S. Restrained approach had been taken by the Fed on raising interest rates this year after raising its target for the first time in almost a decade, in December.

Fed to Watch Carefully – Occurring in Economy

This year the policy committee of the bank now tend to project two rate hikes. Yellen has stated that she does not consider the decision taken in December as a mistake, since indicators during that time portrayed substantial progress towards the Fed’s labour market as well as inflation goals. Going ahead, he noticed the Fed would watch very carefully what is occurring in the economy.

The Fed had dealt with drooping global economy and U.S. inflation below its target, since it decides on how quickly to increase rates. The tightening path of the Fed came as other central banks all over the world including those in Europe and Japan tend to have eased. The policy committee would meet next on April 26 and 27. Some of the observers of the Fed have quizzed on how the central bank would react to a probable recession with policy already accommodative.

Yellen’s Comments – U.S. Stock Market Futures Dropped

On Thursday, Bernanke noticed that the fiscal policy `does not have a role to play’ on top of monetary policy. Greenspan added that the monetary policy should not have the whole load of battling an economic slowdown but he warned against creating more debt with increased government spending.

Yellen had also addressed a recent crusade by Minneapolis Fed President Neel, Kashkari who had floated breaking up large banks to increase financial system stability. She had observed that she shared the concern of Kashkari regarding ending firms’ `too big to fail’ status. However, she stated that the policies such as capital and liquidity needs and stress tests have improved the safety and soundness of the banking system. She commented that she feels more positive on the progress made.

She was also of the belief that the issue is within the purview of Kashkari, noticing that the decentralized structure of the Fed enables independent views. In the wake of Ms Yellen’s comment, the U.S. stock market futures dropped as traders processed signs from the Fed chairman that she would be willing to follow increases in interest rates in the future.

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UK Inflation Rate Stays at 0.3%

UK Inflations Unchanged at 0.3%

According to the Office for National Statistics – ONS, UK inflation, measured by the Consumer Prices Index remained unchanged at 0.3% in February. There was a big rise in vegetables though the transport cost had dropped as per ONS. The annual inflation was below the target of 2% of Bank of England for two years and last year it had been zero. Last month the Bank had stated that it predicted inflation to remain below 1% this year.

Other figures of ONS published at the same time showed that Chancellor George Osborne had been close to missing his target in cutting the budget deficit of the country in 2015-16 financial years. According to ONS, borrowing of the government dropped than anticipated in February which brought the overall deficit so far to £70 for the 11 months of the year, as against the chancellor’s full-year target of £72.2bn.

The borrowing figures could mean that the government could borrow on additional £1.5bn this month if it intends to avoid exceeding the forecast set by the Office for Budget Responsibility during the last week’s Budget. Recent ONS’s release revised January’s borrowing by 2.6bn and even though next month’s figure exceeds the forecast, there is a possibility of waiting longer for confirmation.

Difficulties in Implementing Some of the Planned Budget Cuts

Chief economist at the British Chambers of Commerce, David Kern, stated that while there is a gradual progress in reducing the deficit, the timetables outlined in the Budget last week tends to be ambitious and the return to surplus could take a bit longer than the chancellor hopes.

He further added that `the difficulties in implementing some of the planned budget cuts would increase the problem’. Under the single Retail Prices Index – RPI measure including housing cost, inflation was 1.3% in February, which also remained unchanged from the previous month. According to the ONS, the biggest downward pressure on the inflation rate was from the transport segment with the changes in prices for items like road passenger transport, second hand cars and bicycles.

There was a drop in prices for toothpaste together with other personal care products, though higher prices for vegetables, milk, eggs and cheese compensated for those declines.

Britain’s vote on European Union Membership – Hit UK Economic Growth

An increase was also seen in hotel accommodation and restaurant bills along with the price of furniture as well as household equipment. Lower oil prices kept a cover on inflation leaving the central bank in no haste to increase the rates beyond 0.5% which remained there for almost seven years. The unmoved level of inflation of February comes after three months of increased consumer prices.

 Clothing prices had been up by 0.4% when compared to last year while gas prices had dropped by 6% over the same period after energy giant E. ON’s decision to reduce the cost of gas by 5.1% for two million customers last month. The inflation announcement was made after the Bank of England had voted to maintain the rates on hold once more this month and cautioned that Britain’s vote on its European Union membership could hit UK economic growth.

IMF Says World at Risk of 'Economic Derailment’

Global Economy Faces Rising Risk of Economic Derailment - IMF

The International Monetary Fund – IMF has advised that the global economy tends to face a rising risk of economic derailment. David Lipton, Deputy Director has called for urgent steps to increase global demand. He had mentioned in his speech to the National Association for Business Economics in Washingtonrecently, that they are clearly at a delicate juncture. He warned that the IMF’s latest reading of the global economy indicates once again a weakening baseline.

His comments have come up after weaker than expected trade figures from China portrayed that the exports had plunged by a quarter from a year ago, in February. With the second largest economy of the world often stated as `the engine of global growth’, weaker global demand for its goods seems to be read as an indicator of the general global economic climate. IMF have already mentioned that it would be likely to downgrade the present forecast of 3.4% for global growth when it tend to release in April, the economic predictions. International lender had warned last month, that the world economy seemed to be highly susceptible and had called for new efforts to spur growth.

Downside Risks Clearly Pronounced

Ahead of last month’s Shanghai G20 meeting, in a report, the IMF had mentioned that the group need to plan a co-ordinated stimulus programme since the world growth had reduced and could be derailed by market turbulence, the oil price crash as well as geopolitical conflicts. In his speech in Washington, Mr Lipton had stated that the burden to lift growth falls more squarely on advanced economics which tend to have fiscal room to move.

He added that the `downside risks are clearly much more pronounced than earlier and the case for more forceful and concerted policy action has become more compelling. Moreover risks seemed to have increased further with volatile financial markets and low commodity prices creating fresh concern about the health of the global economy’. A swing of weak economic data had lately been added to these apprehensions and the US ratings agency Moody’s had downgraded its outlook for China from `stable’ to `negative’.

Time to Support Economic Activity

The rising unemployment is also another worry as Beijing tends to slowly shift its economy from over dependence on manufacturing and industry to more services and consumer spending. The economy of China seems to be growing at the slowest rate in 25 years which has resulted in considerable uncertainty in the financial markets all over the world leading to sharp falls in commodity prices.

Lipton has commented that `together with bank repair wherever needed and with adequate targeting on infrastructure, this approach could create jobs and probably reduce public debt-to-GDP ratios in the medium term by motivating nominal GDP as well as support credit and financial stability. On strengthening the global outlook, this coordinated action could hurry healing in the banking sector and prevent continent liabilities for the government which appear in case of inaction.

 Moreover it would also have considerable positive spill-overs to susceptible emerging economics comprising of commodity exporters which would be unable to participate in the fiscal expansion, directly. He added that at the recent G20 meetings in China, he thinks that `there was broad recognition of these risks and priorities and now is the time to support economic activity and put the global economy on a sounder footing’.

40 Banks Test Bitcoin Tech for Trading Bonds

Consortium of 40 Banks Test Using Blockchain

A consortium of 40 main banks comprising of Goldman Sachs and Barclays tested a way to trade fixed income assets by using the blockchain, which is a technology that tends to strengthens bitcoin in an attempt to emphasize how serious the biggest lenders in the world are regarding the technology.

R3 CEV, the financial technology firm that had brought the banks together last year to work on blockchain applications had made the announcement recently.Blockchain tends to work like a large decentralized ledger for the digital currency bitcoin, records each transaction and stores the information on a global network which cannot be tampered. But most of the experts agree that the technology does not seem close to mass adoption and is in the trial stage.

The technology could be applied to wide selection of uses and especially for financial firms; the most interesting parts would involve the clearing of trades. Experts state that the blockchain would enable a huge number of transaction settlements in a matter of minute or even in seconds together with it being very secure since each transaction tends to be recorded and is unable to be tampered. Presently some trades tend to take day in the settling process.

Smart Contract – Computer Code

Supporting this is the idea of `smart contracts, a computer code which would only perform when the terms of a contract are fulfilled. For instance, a trade may be carried out once the money from the buyer is received,all of which would be done automatically and there would not be any dispute since the same has been recorded in the blockchain.

A number of distributed ledger companies had worked with the banks for this test namely Chain, Eris Industries, Ethereum, IBM and Intel. The institutions had done an assessment of each smart contraction solution to trade fixed income of the company.

David Rutter, R3 CEO and a former executive at London based electronic brokerage ICAP had stated in a statement that `this development tends to support the belief of R3 that close collaboration among global financial institutions and technology providers will create significant momentum behind the adoption of distributed ledger solutions across the industry. R3’s website mentioned that its mission is `building and empowering the next generation of global financial services technology’.

Blockchain – Probable Disruptive Force in Finance

These technologies represent a new frontier of innovation and would dramatically improve the way the financial services industry operates, in the same way as the advent of electronic trading decades ago delivered huge advancement in efficiency, transparency, scalability and security’.Banks do not seem to be the only ones interested in technology. Nasdaq used the blockchain, last month to enable international resident of Estonia to vote in shareholder meeting while they were abroad and tested the blockchain for trading shares.

Bitcoin could have risen to more than 35% this year, though it is the fundamental technology behind the crypto currency which is moving the world’s main banks. Blockchain has been indicated as a probable disruptive force in finance by main institutions which tend to claim bitcoin as just the opening act in something bigger.

How Robots will Kill the 'Gig Economy

Gig Economy – Cease to Exist in 20 Years

According to new report from venture backed start-up Thumbtack, an online marketplace which tends to help skilled workers locate customers, the so-called gig economy would cease to exist in 20 years. The study has forecast that logistic companies from start-ups like Uber right to tech giants like Amazon would be replacing drivers as well as delivery workers with autonomous vehicles and drones.

The study discovered that extremely skilled workers like lawyers and accountants would no longer be assured of jobs at big firms - will be the new gig economy workers. Jon Lieber, chief economist at Thumbtack and Lucas Puente, an economic analyst at the firm had mentioned in a report that `the gig economy known will not last.

 In the past few years, analysts and reports have obsessively focused on transportation technology platforms such as Uber and Lyft and delivery technology platforms like Instacart and the workers required for these on-demand services. The fine focus on low-skilled `gigs’ tends to miss a larger story. The rather commoditized, interchangeable services seem to supplement income, not generating middle class lifestyles. Besides, these jobs are probably going to be automated over a period of time and performed by self-driving cars and drones'.

Autonomous Driving Technology – Reduce Death/Transportation Affordable

Uber had been frank with regards to its plans in replacing drivers with robots over a period of time. An Uber spokesperson informed CNBC that `autonomous driving technology has the ability to drastically reduce deaths in cars, making transportation even more affordable. That it is an exciting future and one Uber plans to be part of, but that transition for technical, regulatory as well as adoption reasons, at scale, would take some time. The spokesperson stated that `in the meanwhile, the focus is providing flexible work opportunities for many people in the world as possible’.

According to Oxford academics Car Benedikt Frey and Michael A. Osborne, around half of U.S. jobs seem to be at high risk of computerization over the next 20 years. Their discoveries had been published in 2013 and are unchanged, but there are some limitations like resistance from stakeholders and relative wage levels which would determine if a job is in fact automated, according to Osborne.

Estimates on how many jobs robots will ultimately displace would vary widely. Forrester analyst J.P. Gownder mentioned in a report that `forecast of 16% of jobs would disappear owing to automation technologies between now and 2025.

Supervised by `Robo-Boss’ by 2018

However that jobs equivalent to 9% of present day’s jobs would be created. Physical robots need repair and maintenance professional, one of the several job categories which would grow around in a much automated world’. From the global point of view, over 3 million workers would be supervised by a `robo-boss’ toward 2018, as predicted late last year by research and advisory firm Gartner.

Osborne has stated that jobs which are least likely to be automated initially are those which need a high level of creativity or emotional intelligence. For instance, school teacher jobs seem to be comparatively safe due to the elevated level of social intelligence needed to teach as well as mentor children.

 The Oxford study found positions which seem mostly susceptible to automation comprise of telemarketers, watch repairer, tax preparers, insurance underwriters, cargo and freight agents and others. In each category, some jobs would be automated very soon. Osborne states that `this gig economy is being pursued via digital platform and is actually getting individuals to automate themselves out of a job by delivering data back to the platform which could be utilised in providing an automated substitute.

Asian Shares Slip, Though China Ekes Out Gain

Shares of China Eked Gains

Shares of China have eked out gains though most of the Asian markets have reviewed some of their latest rally, with traders assimilating weaker than expected trade data from the mainland. A market analyst at IG, Angus Nicholson had informed sources that plenty of the latest rally in stocks had been driven by major reversal or short covering in financials, materials as well as energy. However, he mentioned that momentum decreasing in the other sectors have now been falling in these sectors also.

The trade data of China that was released at about 10.30 a.m. SIN/HK time was also not positive for sentiments with the February exports dropping to 25.4% in terms of U.S. dollar, while imports fell by 13.8%, with the drops wider than anticipations. Since 2009, the decline in exports had been the largest on year drop according to Reuters.

 The Chinese markets ended higher with the Shanghai composite ending up 2.57, or 0.1% at 2,899.91 with the Shenzhen composite up 8.89 points or 0.51% at 1,750.56. Nicholson had noted that the foreign exchange reserves data of China, released overnight would probably have totally reassured markets around the prospect for further Yuan devaluation.

Official Data Released – Marked Fourth Straight Month of Decline

An official data released recently after the market close, portrayed foreign currency reserves on the mainland dropped to $3.2 trillion towards the end of February, declining from $3.23 trillion the earlier month, thus marking the fourth straight month of decline. However, the pace of outflows slackened substantially and the February figure was in line with analysts’ potentials portrayed in Reuter’s poll.Among other markets, benchmark of Japan, Nikkei 225 closed down 128.17 points or 0.76 percent at 16,783.15 extending Monday’s drop of 0.6%.

Reuters had reported revised government data, before the market opened, showing Japan’s economy had shrank at an annualized 1.1% in the final quarter of 2015 which was revised up from a initial reading of 1.4% contraction. Through the Korean Strait, the Kospi had closed down 11.75% or 0.60% at 1,946.12 while in Hong Kong; the Hang Seng index had closed down 148.14 points of 0.73% to 20,011.58.

Main Miners – Australia, Given up on Early Gains

The main miners in Australia had given up on early gains with Rio Tinto closing at 2.60% BHP Billiton less by 1.83% with iron ore producer Fortescue dropping 9.42% after surging almost 24% on Monday. Fortescue had announced before the market open that it had been in talks with Vale in order to work together to blend iron ore to meet up the demands of its consumers.

 According to the announcement there was a possibility of seeing the Brazilian miner take a 5-15% minority stake in Australian miner. On the other hand, Gold miners saw an uptick with the shares of Newscrest closing at 1.30% while Alacer Gold added 0.72%. HK/SIN time spot gold traded high at $1,269.57 for an ounce though below the Friday peak of $1,279.60, which was the highest since February 3, 2015 as of 3.13 p.m. U.S. gold for April delivery had gained overnight by 0.5% to $1,269.90 an ounce.

Suzuki Motor, Japanese automaker had closed at 3.76% after a report in the Nikkei stating that the company would issue 200 billion yen in zero-coupon convertible bonds, using most of the profits in spreading its setup in India.

Bitcoin Could Help Cut Power Bills

Accenture a multinational service and consultancy firm has created a smartplug which tends to leverages blockchain technology in seeking the lowest tariff possible thus saving money by reducing the electricity costs whenever it is possible. Research recommends that the technology behind the Bitcoin virtual currency could be helpful in reducing electricity bills.

A blockchain based smart plug has been created by technologist at Accenture which tends to adjust power consumption every minute. The blockchain is the automated ledger which tends to underpins Bitcoin, tracking where the coins are spent and swapped. The plug shops for various power suppliers and would sign up for a low-priced tariff it comes across one.

Accenture has mentioned that the smart plug can help people on low incomes who may pay directly for power. According to Emmanuel Viale, head of the Accenture team at the firm’s French research lab which tends to work on the plug, has commented that the smart plug tends to adapt the basic Bitcoin blockchain technology in making it more active.

 Rather than just resolving and confirming the records of transaction, Accenture work helps in changing the blockchain in permitting it to negotiate deals on behalf of its owner. Mr Viale has mentioned that `it is about how one puts more business behaviour or logic in the blockchain and that this essentially embeds a `smart contract’ in the digital ledger.

Searches for Energy Price When Demand is High/Low 

The smart plug model tends to work with the other gadgets in the house which monitors the power use. It tends to search for energy prices when the demand is high or low and then utilises the modified blockchain in order to switch suppliers if it finds a cheaper source.

Mr Viale had said that so far the Accenture system was just a proof of concept though it could help several people on lower incomes who seem to pay for their power through a meter. With the capability of shifting suppliers, it could save this group with over £660m in the UK annually,recommend Accenture research. Blockchain-based system which tends to act on behalf of its owner could also be useful as the Internet of Things becomes more universal according to Mr Viale.

He adds that handling of several various gadgets could be complicated without a much centralised system. A mobile services expert at analyst firm CCS Insight, Martin Garner stated that blockchains were beginning to crop up in various areas inclusive in share trading, fishing rights databases as well as land registry claims. He said that they had two main attractions for the Internet of Things.

Substantial Ventures in Exploring/Investing in Blockchain 

He further added that they avoid dependence on any particular supplier or ecosystem. Some users seem to have concerns regarding the possible dominance of key internet players developing for instance, the Google-of-Things or the Amazon-of-Things.

The second attraction is a means of enabling autonomous trading between things like the appliances in your home being set up to re-order supplies from a pre-approved list of suppliers. As the leading independent services firm in the world, Accenture has made substantial ventures in exploring as well as investing in blockchain or distributed ledger technology recently.

Moreover, the company also became one of the investors in blockchain-startup, Digital Asset in January. A new partnership following its investment with Digital Asset would also see blockchain solution together with ideas offered and organized to the global client base of the consulting firm. Accenture has been servicing 42 of the top 50 financial institutions worldwide, thus making its blockchain attempt, a substantial one to the Bitcoin technology.

Pensions still the most effective savings option, says IFS

Pension – The Most Tax-Efficient Kind of Savings

Pensions still tends to be the most tax-efficient kind of savings, inspite of the tax changes, according to the Institute for Fiscal Studies – IFS. It seems to be the big winners since they are subject to various tax advantages. The pension contributions are taken out of untaxed income resulting in paying into a pension that actually lowers the income tax bill.

Moreover, the returns on your investments are not taxed though one tends to pay tax on withdrawals. Besides this one tends to take 25% of the pension as a lump sum without having to pay a penny in tax. According to IFS, `pension saving is in effect subsidised’.

 The IFS had made a comparison of saving in a pension with buying a house, putting funds in an Individual Saving Account –Isa, or investing in buy-to-let property. The foremost motive is that under the auto enrolment programme, employers tend to match employee contributions resulting in workers getting 60% increase to their pension, according to IFS. According to the report, since the employers seldom make equivalent offers matching employees’ contribution, for instance in an Isa or a house, it tends to make savings in a pension more attractive comparative to other assets.

Personal Savings Allowance – PSA

The research took into accountthe new Personal Savings Allowance – PSA as well as the changes to dividend taxation which will be effective in April and probable changes to pension taxation. The government had earlier mentioned that any such changes would motivate people in saving. When the PSA tends to become effective, basic rate taxpayer would not pay tax on the first £1,000 of their saving income while higher rate taxpayers would be getting an allowance of £500.

IFS have mentioned that due to this, the 16m people would stop paying any interest on their income savings and 95% of the people would no longer have their savings taxed. But the report has stated that the change would weaken the incentive for several people in saving in an Isa.

It stated that for most of the people, the ordinary bank account would in effect be tax-free just the same way as cash Isas and there would be little incentive in saving in a cash Isa. Moreover, the PSA would also mean an end to tax deduction at source on the saving accounts that would be of certain help to pensioners.

The research also observed that people desiring to invest in property would make a much better tax-efficient choice by investing in their own home instead of becoming buy-to-let landlords. The report further states that `investment in owner occupied housing is significantly more tax-advantaged than the investment in property to-let, prior to recently announced changed to the treatment of mortgage interest for landlords.

There have been plenty of talks regarding further changes to pension that would be announced in the next month’s Budget. The present thinking seems to be that the government would be setting a flat rate of around 30% and this would essentially represent a further increase to pension saving for basic rate taxpayers who tend to currently enjoy tax relief of 20% on their contribution.

 However, it will dip the appeal of pensions to higher rate as well as additional rate taxpayers who tend to enjoy tax relief of 40% and 45% presently.

The current thinking seems to be that the government will set a flat rate of somewhere around 30%. This will actually represent a further boost to pension saving for basic rate taxpayers, who currently enjoy tax relief of 20% on their contributions, but will dent the appeal of pensions to higher rate and additional rate taxpayers who enjoy tax relief of 40% and 45% at the moment.

China Replaces Securities Regulator Xiao Gang

Xiao Gang Replaced by Liu Shivu – China Securities Regulatory Commission

China has removed the head of its securities regulator after a stormy period in the country’s stock market, by appointing a top state banking executive in his place since leaders tend to move in restoring confidence in the economy. The announcement on the official Xinhua news agency recently trails a string of assurances from senior leaders succeeding the Lunar New Year holiday which China would be supporting in slowing economy as well as steadying its shaky currency.

According to media report, Xiao Gang has been replaced by Liu Shivu as the chairman of the China Securities Regulatory Commission – CSRC as it tried to tackle main volatility in its stock markets. Mr Xiao had been in charge when China’s market had crashed in mid-2015 at one point and the Shenzhen and Shanghai stock exchanges had lost around 40% of their value. Mr Xiao who had become the CSRC chair in March 2013 had faced criticism for mishandling the crisis. Under his supervision, the new circuit breaker mechanism of China which was designed to limit any market sell-off had been organized twice in January in reaction to the stock market drop though was then scrapped totally after it had cause additional panic.

Departure of Xiao – Not a Surprise

Zhang Kaihua, fund manager of Nanjing-based hedge fund Huyang Investment stated that the departure of Xiao was not a surprise after the recent stock disaster and this is a role which is vulnerable to public criticism since most of the Chinese retail investors are intended to lose money in such markets. Xiao and the CSRC had come under fire as Shanghai and Shenzhen stock markets of China had collapsed to about 40% within a few months last summer.

It was a further blow when a stock index circuit breaker that had been introduced in January to limit stock market losses had to be deactivated after four days of use since it was responsible for worsening a sharp selloff. The online media had labelled Xiao as `Mr Circuit Breaker’. According to Reuter’s reports, Xiao 57 had offered to resign after the `circuit breaker’ failure.A Shanghai-based analyst at Capital Securities Corp, Zheng Chunming had informed Bloomberg News that someone had to shoulder the responsibility after the suspension of the circuit breaker system.

Liu – Experience in Financial Sector

Mr Liu 54, had been the vice governor of China’s central bank, the People’s Bank of China, prior to becoming the chairman of the Agricultural Bankof China, which was the country’s third largest lender in 2012. On Weibo, the Chinese micro-blogging site, commentators recently played on Mr Liu’s name speculating if his tenure would bring about a `bull market’ of leave a `dead fish’ behind. Zhang stated that `Liu had a lot of experience in financial sector though there would be some policy uncertainty in the short term since it would take at least six months for the earlier banker to get used to his new role.

The managing director, sales trading at Haitong International Securities Group in Hong Kong, Andrew Sullivan said that removing Xiao had been mainly expected but by bring in the AgBank chairman; they are really not bringing anybody with a fresh market perspective but a political insider. Liu had spent major part of his career at the People’s Bank of China escalating to deputy governor, holding the post from 2006 till he left in late 2014 to head the AgBank.

Bitwalking Dollars - Digital Currency Pays People to Walk

Digital Crypto-Currency Generated by Human Movement

Digital crypto-currency generated by human movement has been launched and the bitwalking dollars would be earned by walking which would be different from other digital currencies like Bitcoins that are mined by computers. A phone application tends to count and verify the user’s steps with walkers earning around 1 BW$ for about 10,000 steps. Originally user would be given the opportunity of spending what they earn in an online store or trade them for cash.

Nissan Bahar and Franky Imbesi, the founders of the project have drawn over $10m of initial funding from mostly Japanese investors in helping to launch the currency as well as in creating the bank that tend to verify steps and the transfers.

Murata, the Japanese electronics giant is working on a wearable wristband which would be providing a substitute of carrying a smartphone and show how many BW$, the wearer seems to earn. Shoe manufacturers are also ready to accept the currency where a UK high street bank is in talks in partnering with the project at one of the biggest music festivals in UK, next year. The founders tend to have a track record of disruptive technology which could support developing nations as much richer ones.

Bitwalking Scheme Help in Transforming Lives

Last year, Keepod, a $7 USB stick which tends to act like a computer had been launched in Nairobi, Kenya. The purpose of Bitwalking is to take the benefit of the trend for fitness trackers by providing an extra incentive in keeping fit.

The global scheme intends to partner with sportswear brands, health services, environmental groups, health insurance firms as well as possibly advertisers who may be offered exclusive visions in the targeting audiences. In the near future, employers could be invited in taking part in a scheme which would be offered to their employees in encouraging them to stay fitter with the currency they tend to earn converted and then paid along with their salaries.

The average person in developed nations would be earning about 15 BW$ per month, though it is anticipated that in poorer countries, where the people would have to walk further for work or school or just to collect water, the Bitwalking scheme could help in transforming lives.

Education on How to Use Money in Additional Opportunities

The power Bitwalking could make in the developing countries is not lost on the founders and is one of the main reasons for creating the currency. In Malawi, one of the African nations, tojoin at the time of the launch, the average rural wage was just US$1.5 per day.

Karen Chinkwita, business advisor runs Jubilee Enterprises providing business guidance to young people in Lilongwe and has commented that there could be a temptation for some to walk rather than work. Most of them would prefer to earn more money and would do both. With some education one can teach them how to use that money in creating additional opportunities.

 Carl Meyer, Bitwalking manager for Malawi, has established the first two Bitwalking hubs in Ligonwe and Mthuntama wherein local people would be trained on how to trade the BW$ online for US$ or the local currency, Malawi Kwacha. Bitwalking has not formally released the procedure utilised in verifying steps but states that it uses the handsets’ GPS position and the Wi-Fi connection for the purpose of calculating distance travelled. The phone reports the type of movement and speed as measured by the accelerometer.

Tax and Encryption Rows Cast Shadow on UK Tech Boom

Tax/Encryption Commotion between Tech Giants/Government

Digital minister Ed Vaizey MP has stated that tax and encryption commotions between tech giants and government need not dominate the growing tech industry of UK. Vaizey had debated that critics in tech had not appreciated the intention of the bill, on the same day when critics on the Joint Select Committee had reported that the extension of digital surveillance powers of the government had to be fundamentally reconsidered.

He had informed WIRED that he `wanted it to be in partnership between the government and tech and often there is a binary approach. If one talks about the security services requirements, in a digital age, to be safe, you will be riding roughshod over protected principles in tech’. UK tech is a central part of the economy informed Vaizey emphasising that the latest Tech Nation survey which showed in digital was faster by 32% when compared to the rest of the economy.

Tech giants including Apple and Google said that the Investigatory Power Bill seemed to outlaw end-to-end encryption utilised by messaging services inclusive ofWhatApp and iMessage. Other critics have informed that the bill is `sloppily’ written and comprises of areas of considered vagueness

Digital Industries – Annual UK Turnover of £161 Billion

In response, Vaizey had repeated the assertion of the government that the Prime Minister David Cameron had not wanted to ban’ encryption but maintain powers over its use as well as the companies which tend to employ it. Vaizey had mentioned that they had the same debate on adult content and saw nothing wrong, viewingit as the role of a politician.

He would not let kids to read hard-core pornography when it is printed and that they need to do something to ensure that they don’t stumble across this on the web and should work together. He feels that they have made progress on that and hopes to have the same debate with regards to security. As the debates tend to carry on, the industry continues to grow. As per the annual Tech Nation report, formed by the government-funded Tech City UK industry group, together with the revolution charity Nest and GrowthIntel, digital industries tend to have an annual UK turnover of £161 billion

Digital Jobs Created in Unexpected Areas

Tech seems to be growing across the UK, not just in London; with the turnover growth for instance higher in Southampton than London as per Tech Nation. The details of the report as in 2015 had highlighted continued issues beyond the South East on England with infrastructure, access to funding as well as availability of expertise.

Chief executive of Nesta, Geoff Mulgan had mentioned in a report that it showed a number of digital jobs created in unexpected areas. He had also mentioned that the government had to do more in supporting the growth of tech in health, new industries like the Internet of Things as well as the ability of the UK in the development, retaining high value companies to work on artificial intelligence and machine learning.

He further added that `for all those though there is a challenge over the question of whether government is really using its policy power, purchasing power sufficiently, policy plays a big role in FinTech’ He is of the belief that several people in government would acknowledge that there is not the same equivalent alignment yet.

Buybacks Could Be the Stock Market Savior This Year

Dividend Issuance/Share Buybacks – Post-Financial Crisis

Companies may have to fend for themselves considering the gradually bleak in stock market returns. In 2016, retail investors have been bailing on stocks and pulling money from the domestic equity funds each week due to which the S&P 500 was down by 8% year till date before the market plunge on Monday.

This was a bad indication for a market that historically takes its full year hint from how it transpired earlier and companies seemed to be willing to step into the emptiness. Dividend issuance together with share buybacks were the major tailwind for the post-financial crisis bull market that would turn 7 years old in a month had it had managed to hang on through the present volatility.

Short historical valuations accompanied with cheap money had given rise to pushing companies to return trillions to the investors. Due to the blackout period over for buyback declarations, Wall Street is hoping for big things. Chief U.S. equity strategist at Goldman Sach, David Kostin, had mentioned in a note his team had sent to client recently, that early indication are that 2016 buybacks are `on pace to be one of the fastest starts on record’.

Companies Expressed Continued Commitment to Buybacks

So far the total announcement was $63 billion scarcely a month into the year, with Kostin considering that it is just the beginning. He comments that companies have usually expressed a continued commitment to buybacks, aware that the market weakness could be a reason for increase instead of narrowing their purchases.

 In 2015, buybacks had amounted to $724 billion, a year which had ranked second only to 2007 in total volume as per market data research firm TrimTabs. The year set a second record for several corporate money, utilised for buybacks as well cash takeovers at $1.41 trillion.A comparison with 2007 would not essentially promise well for the market taking into consideration that was the year wherein the house-led bull market started to crash.

However, the conditions of the market were different, where optimism was running high and equity allocations almost at 70% in 2007. Investors were cautious of the stock market with Goldman’s indicator putting sentiment at 2 on a scale of 1 to 100. Kostin had informed that it indicates a likely market rise of 4% in the following month depending on corporate buyers filling the void left by retail investors.

Management Optimism Important to Market

He further added that management optimism was important to the market since corporates tend to represent the main source of demand for U.S. equities beyond the present environment and the increase in buyback activity after 4Q earning season usually matches with the out performance of large stocks of buyback.

Classifying single companies, he said tend to poise for significant buybacks comprising of Gilead Sciences that specified $12 billion and 3M with $10 billion. Besides this, GE is composed for a hugs cash deployment for an unspecified mix of buybacks as well as dividends.

On the other hand Apple, Microsoft and Qualcomm too have substantial cash on hand to give on buybacks. Though the flow in buybacks has matched the sharp run-up in stock prices, investing money especially towards companies which tend to use their cash in that way has faced mixed success.